Talk & Talk

Prolexus (8966) Is there a risk of being sniped and acquired?

Publish date: Mon, 11 Oct 2021, 10:34 AM

For those in the industry, maybe this is a good time to acquire Prolexus!

First of all, we can compare with the previous quarter to see if assets have increased or decreased? The NAPS in the last quarter was 1.51, while the NAPS in the latest quarter was only 0.99. That means the company sold its assets due to short for cash flow. 

Let's take a look at the "Cash and bank balances" of PROLEXUS BERHAD-interim report (2021-Q4) vs 2020-Q3, its shown drop from 84,935k to 43,491k.

These data are actually telling us a serious fact, that is, Prolexus's cash flow has problems, and it is already a serious negative cash flow. These problems have fully manifested after the severe reduction in mask orders.

In the absence of cash flow and negative cash flow, Prolexus will appear helpless and powerless once faced with any sniper.

The next problem they may face is that they should repurchase their company's stock, not only to stabilize the stock price (this is why it has remained above 0.40 for a long time), but also to ensure that the stock price must be above a certain price. Otherwise, in the case of insufficient funds (obviously negative cash flow), Prolexus may have to face the risk of being sniped and acquired. This is very likely to happen, because NAPS still has 0.99, isn't it? For those of us small investors, it may be a good thing! Let us wait patiently for the development of the situation!

Therefore, it may be time to hold the ticket in hand, or maybe the right time to enter the venue. Let see if my views in this round are correct or not?

Share Quantity = 276,569,231
Share Price (08/10) = RM 0.41
Market Capital = RM 113 million

35% = 40 million

If the average purchase price is 0.50, then the 35% acquire is only RM 48 million. For a powerful group company, this is not expensive at all. It can immediately be converted into production capacity and create greater revenue. Those who are still growing during the epidemic, when they acquire these problematic but potentially valuable companies will be the key to take off after the epidemic. Believe that these high-quality companies will not easily give up this century's rare opportunity.

Will it happen? I don't know, but let's wait and see.

Let’s take a look at Prolexus’ shares %.

The largest shareholders are Lau Mong Ying (Direct + Indirect = 20.59%) and Lau Mong Fah (Direct + Indirect = 10.53%), totally 31.12%.

The shares of other directors add up to only 1.39%. Therefore, the number of shares circulating in the market is too much, and the price is low now, the prospects are worrying!

I once said that "BONUS ISSUE" is one of their biggest mistakes! This policy seems to help the company stabilize the stock price in the short term, but it consumes a large amount of the huge profits that are rare in 2020 Q3. This is the biggest failure of their CFO. The potential consequence is that once any group company snipes them, they can't stop them at all, because they have no ammunition. Good luck for them, but it's seem a good new for us as retail investors.


*** The above is only to provide a possibility that maybe happen for discussion, not a summary or conclusion.


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